In Re Lu Zhonglou [2025] HKCFI 6165, Master Maurice Lam annulled a bankruptcy order and dismissed the petition on the ground that the creditor failed in its duty of full and frank disclosure when seeking leave to present a bankruptcy petition and obtaining substituted service orders.
Material Facts and Background
Mr Lu was a long‑standing casino customer of the Petitioner from about 2010. In December 2021 he signed a credit agreement under which substantial gaming credit was extended, leading to a Singapore judgment. The judgment was registered in Hong Kong and partially satisfied, leaving about HK$70.8 million outstanding. The Petitioner then served a statutory demand and obtained ex parte leave to present a bankruptcy petition and for substituted service; Mr Lu was adjudged bankrupt in April 2025. He subsequently applied to annul the bankruptcy order on the basis of defective service and material non‑disclosure.
The Petitioner had attempted personal service of the statutory demand only at the Tuen Mun address stated in the credit agreement, then obtained substituted service orders (for the demand and later the petition) to that address and by advertisement. Its affirmation evidence asserted that it was not aware of any other address at which service could be effected, had no reason to believe Mr Lu was no longer within the Hong Kong jurisdiction, and Mr Lu had not evinced an intention to leave Hong Kong.
In reality, the Petitioner knew of other Hong Kong addresses connected to Mr Lu from company searches and had used one of them in earlier garnishee proceedings; it also held his Australian contact details and knew facts pointing to his relocation overseas. None of this was disclosed to the Court when leave and substituted service were sought.
Court’s Rulings
The Court treated these matters as “relevant facts as to the debtor’s whereabouts” which ought to have been disclosed to allow the Court to perform its “weighing operation” on service and jurisdiction. Their omission amounted to material non‑disclosure; leave to present the petition and the substituted service orders were therefore fatally irregular, and the petition was dismissed with the bankruptcy order annulled, costs nisi against the creditor.
On annulment, the Court applied the Court of Appeal’s decision in Kam Hung Cheung v Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 597 and noted that failure to serve the statutory demand properly is a ground for holding that the bankruptcy order ought not to have been made: see e.g. Re Lam Lai Wah Susanna [2002] 4 HKC 334 (CFI) and [2003] 2 HKC 520 (CA) and Re Lam Chik Sing, ex p Hong Kong Chinese Textile Mills Association [2009] 2 HKLRD 107.
On full and frank disclosure, the Court emphasised that materiality is an objective concept focusing on whether the undisclosed matters are relevant to the court’s decision‑making. The Court rejected as “misguided” the Petitioner’s submission that disclosure of other addresses was unnecessary because service there would have been futile. The Court also held that the Petitioner’s subjective belief about Mr Lu’s migration status was irrelevant and not a valid reason for omitting to disclose its awareness of Mr Lu’s overseas contact details.
Key practical takeaway
Creditors must put before the court all reasonably available addresses, channels of contact and indications of foreign residence. They are not entitled to filter out information they consider unhelpful or “futile” to service. Breaches of this duty at the ex parte leave and substituted service stages can unravel the entire bankruptcy process and result in adverse costs.
Read the judgment here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=175443&currpage=T
Mr Douglas Lam SC and Ms Jacqueline Law instructed by Reed Smith Richards Butler LLP for the Bankrupt.
